Proposed Amendment to Taiwan's Income Tax Act

To benefit all Taiwan citizens and put Taiwan first, on October 12, 2017 the Executive Yuan adopted a proposal by the Ministry of Finance to amend the Income Tax Act with an aim to boost the nation's competitiveness by necessary tax reforms taking into consideration the need to balance inequity in taxation of the locals and their foreign counterparts doing business in Taiwan, and reduce the burden for startup companies.

The important features of the proposal include the following:-

1.     Remove the highest bracket of 45% for individuals with net taxable income over 10 million NT dollars. After the proposal is passed into law, the second highest bracket of 40% will be the highest bracket for individuals.

2.     In order to assist startups and small businesses, solo proprietorships and partnerships will not be subject to profit tax but instead profit tax will be levied as individual income tax on solo proprietors or partners respectively.

3.     The surtax on retained earnings will be decreased from 10% to 5% for all entities subject to corporate income tax.

4.     Repeal imputation tax system in dividends taxation.  Corporate dividends will either be taxed separately at 26% or combined into gross taxable income with a deductible credit of 8.5% (but will not to exceed NT$80,000 per household filing a single tax return), whichever is elected by a taxpayer.

5.     Corporate income tax will increase from 17% to 20% and dividend tax for foreign investors will increase from 20% to 21%.